iShares US Treasury Bond ETF

GOVT

Market cap $33.4B

The iShares U.S. Treasury Bond ETF provides diversified exposure to the full U.S. Treasury yield curve, from 1 to 30 years. GOVT is managed by BlackRock Fund Advisors, with a low expense ratio of 0.05% and approximately $33 billion in assets. The ETF exclusively holds investment-grade U.S. Treasuries, offering safety and government backing for risk-averse investors.

The iShares U.S. Treasury Bond ETF is on course for its first positive October since 2019.

I maintain a hold rating on GOVT, as lower rates and less yield squeeze make it less compelling than a quarter ago. GOVT offers low-cost, highly liquid access to the full US Treasury curve, with a 4.05% yield to maturity and moderate duration risk. Despite weak price momentum and seasonal headwinds, the current yield provides more cushion against interest rate rises than in prior years.

Diversify your ETF portfolio for a smoother ride.

The iShares U.S. Treasury Bond ETF (GOVT) offers low-cost exposure to U.S. Treasury bonds with a current yield of over 4% and a duration of 5.8. With U.S. economic uncertainty and potential recession, GOVT ETF is appealing as a safe haven, especially given recent equity market volatility and declining consumer confidence. Tariff uncertainties and potential inflation spikes make GOVT ETF a prudent choice, with expected Fed cuts and regulatory reforms potentially supporting long-term U.S. Treasury demand.

Tariffs aren't everything. We believe the U.S. is in late cycle growth and that isolated events such as an intensifying trade war merely accelerates a hard-ish landing argument. A myriad of reasons could explain the recent treasury bond performance-to-recession outlook decoupling. We maintain that the iShares U.S. Treasury Bond ETF can protect against risk in the longer term. Our outlook includes 10-year yields falling below 3% within the next 12 months, GOVT might benefit from such a scenario if it increases its effective duration while maintaining hybrid exposure.

The iShares U.S. Treasury Bond ETF offers low expense ratios and zero credit risk, but its duration is high. Expectations of inflation are high, a harbinger for higher inflation, reflective of aggregate decision making in anticipation of tariffs. Other parts of the US' current policy agenda are also additional sources of inflation.

Interest rates are historically high. Bonds often offer higher yields than REITs. Yet, REITs crush them over the long run. Here's why.

GOVT offers broad exposure to Treasuries with low interest rate risk and at a low expense ratio of 0.05%. The ETF's performance is consistent with market reactions to the pandemic and the Fed's policies, making forward-looking assessments easier. Despite potential rate cuts, I expect a stable yield due to strong economic conditions, persistent inflation, and a currently cautious Fed.

Expectations of Fed rate cuts have been rising lately due to continued signs of cooling inflation.